Small firms are set to receive an aid package

As the £20billion tax cuts were announced in Alistair Darling’s pre-budget report, the government hopes the VAT reductions will encourage consumers to spend more in an attempt to improve Britain’s economy ahead of the budget report in March 2009. However to pay for the tax cut from 17.5% to 15% over the next 13 months, it’s been declared that from 2011 National Insurance would rise by 0.5% and there would be a new 45% tax rate for those earning over £150,000.

The chancellor has predicted the economy will grow from 2010 onwards, despite the International Monetary Fund cutting its growth forecasts for the economy from 1.7% to 0.1%. The IMF have also said that along with Ireland and Spain, Britain is most at risk of a housing crash and a year long recession. The Tories and Liberal Democrats have hit back at the move by the government, with the Conservatives stating that people earning over £20,000 will be worse off, while Labour claims it will only be high earners – those on £40,000 and above that will suffer.

Though it’s not all bad news, ministers have announced small firms in the UK are to receive a £350million aid package to help them cope with the financial crisis.